Okamura (TSE:7994) Has Announced That It Will Be Increasing Its Dividend To ¥45.00

Okamura Corporation (TSE:7994) has announced that it will be increasing its dividend from last year's comparable payment on the 9th of December to ¥45.00. This makes the dividend yield 4.2%, which is above the industry average.

Check out our latest analysis for Okamura

Okamura's Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Okamura's dividend was only 40% of earnings, however it was paying out 198% of free cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.

The next year is set to see EPS grow by 3.4%. Assuming the dividend continues along recent trends, we think the payout ratio could be 46% by next year, which is in a pretty sustainable range.

Okamura Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the dividend has gone from ¥14.00 total annually to ¥90.00. This works out to be a compound annual growth rate (CAGR) of approximately 20% a year over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Okamura has seen EPS rising for the last five years, at 18% per annum. While on an earnings basis, this company looks appealing as an income stock, the cash payout ratio still makes us cautious.

Our Thoughts On Okamura's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Okamura is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for Okamura that you should be aware of before investing. Is Okamura not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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